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Price Elasticity of demand

March 24, 2016 | Author: | Posted in economics, mathematics and economics

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Price Elasticity of Demand

Its Dynamics and Development

Economics studies human choice patterns and behavior and how it influences commerce , industries , businesses and people . Economics has two main fields : microeconomics which focuses on personal choices and macroeconomics which focuses on aggregate choices ( Economics Elasticity is an economic term that refers to the the incremental percentage change in one variable with respect to an incremental percentage change in another variable ( Elasticity (economics The concept of elasticity is an elelment of understanding the [banner_entry_middle]

price elasticity of demand . Price elasticity of demand evaluates the sensitivity of the quantity of goods demanded when price changes ( Price Elasticity of Demand

This aims to characterize the concept of price elasticity of demand and reflect an understanding of its key concepts as it applies in actual scenarios . Price elasticity of demand will be used as a tool to understand market and product trends . The proposes that a profound study of the nature and applications of price elasticity of demand can enhance understanding of economic concepts and allow insights for future applications

Price Elasticity of Demand

Formulation

To be able to calculate the price elasticity of demand or price elasticity , one was first to compute the percentage of change in quantity demanded . This can be done by dividing the change in demand by the old demand

The next step is to calculate the percentage change in price . This can be done by following this formula

WE can now compute for the price elasticity of demand . According to Fibich , Gavious and Lowengart , Price elasticity of demand is the percentage change in quantity demanded as a result of a 1 percent change in

price (pp . 66 . They give this formulation to denote the concept Price is denoted by

and Q (p ) denotes market demand . To simplify dividing the percentage of change in quantity demanded over the percentage of change in price will give the price elasticity of demand

The formula is used instead of a slope to limit sensitivity to units of quantity or price . In a straight line demand curve , elasticity is proportional to price and is inversely proportional to quantity ( Economics Basics : Elasticity . This means that if prices go down one can expect an increase in demand or that price elasticity of demand is negative . However , the result can also yield a positive figure meaning the demand will go up as price goes up . This may be because demand of the good is very extremely strong or when buyers have little bargaining power ( Economics

Price demand elasticity is more than just the slope of demand or price functions . Instead it is actually the slope of the function of price and demand given a set of actual or tendencies of demand given certain prices . This plots in a function or formula that will indicate varied elasticity given different points . It is the slope of a function in a coordinate space , that is , a line with a constant slope will have… [banner_entry_footer]

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